A Promising Convergence on Health

No one ever went broke betting against the prospects for health care reform. Now that the Boston Red Sox have won the World Series (twice), the failed pursuit of universal health insurance by generations of political leaders arguably stands as the premier example of unremitting futility in American life.

But a National Journal forum on health care I moderated last Thursday offered clear glimmers of hope about the possibility of a breakthrough. At the forum, held a few hours before President Obama's White House summit, there were, inevitably, warning signs too. But the signals of emerging consensus were especially promising because they came from two heavy hitters with both the institutional platform and personal inclination to play central roles in the upcoming legislative maneuvering: Andy Stern, president of the Service Employees International Union, and Karen Ignagni, president and CEO of America's Health Insurance Plans, the industry trade association.

Most significantly, both Stern and Ignagni said they would accept a trade-off critical to any universal coverage legislation: fundamental insurance reform in return for a mandate on all Americans to purchase health insurance (with government subsidies to limit their costs.)

I asked Ignagni if health insurers were willing to accept a requirement to sell policies to all applicants regardless of their prior health condition--a reform known as "guaranteed issue"--if Congress mandates that all Americans buy insurance (a so-called individual mandate.)

She said yes. "Clearly the public is telegraphing
that they don't want to have a system where people are falling through
the cracks, where they can't purchase," she said. That reaffirmed an
under-reported statement embracing the mandate-guaranteed issue trade from AHIP's board of directors last December.

Then
I asked Stern if he would accept the individual mandate if the
insurance industry agreed to guaranteed issue. He said yes--so long as
families can afford the coverage they are required to buy. "Yes, if
it's affordable," he said. The mandate, he suggested, might need to be
phased in until benchmarks in affordability are reached. "But in the
end," he concluded, "you can't have a system unless everybody is part
of it."

Why is that convergence between
Ignagni and Stern so important? Because pairing guaranteed issue (with
one additional wrinkle we'll address shortly) with an individual
mandate is the key, both politically and substantively, to any
realistic plan for universal coverage. As one administration official
put it after hearing about the remarks from Ignagni and Stern, "That's
the deal. It is phenomenally encouraging."

Politically
this trade is so valuable because it marries the top priority of the
insurance industry (a mandate that moves all Americans into the risk
pool and, not incidentally, creates nearly 46 million new customers for
them from the uninsured) with the top priority of the industry's
critics--an end to the practice of denying coverage to people with
prior health problems. Linking the two ideas is also substantively
necessary. If insurance companies are required to sell to all
applicants regardless of health condition, and no mandate is imposed,
people could wait until they get sick to buy coverage; that would
compel insurers to raise rates on everyone else to guard against that
risk, diluting the value of reform.

Stern's
embrace of the individual mandate--even with the caveat of
affordability--is important because most labor leaders have resisted
the idea. They've argued it would force the uninsured to buy coverage
that is too expensive or inadequate; that fear led the California AFL-CIO,
myopically, to kill a universal coverage plan based on the
mandate-guaranteed issue trade that Republican Gov. Arnold
Schwarzenegger passed through the Democratic State Assembly in
December, 2007; the bill died one month later in the State Senate. Both
chambers are controlled by Democrats.

As a candidate, Obama opposed
the individual mandate, but many around him believe he'd take a
mandate-guaranteed issue deal in a heartbeat--so long as it meets
Stern's affordability criterion. If Obama did move that way, Stern's
support would provide him cover on the left and maybe even increase
pressure on the national AFL-CIO to go along; Sen. Edward M. Kennedy's
likely acceptance of that trade would help too.

Stern's
conditioning of his support for the mandate on affordability brings us
to the wrinkle telegraphed above. Reformers believe an individual
mandate should be tied not only to guaranteed issue but some form of
"community rating" that limits the disparity between how much insurers
can charge the old or sick vs. the young and healthy. After all, a
guaranteed issue rule wouldn't do much good if policies are priced at
absurdly unaffordable levels for those with, you know, actual health
problems.

AHIP's board statement last December
was silent on a community rating requirement and Congressional aides
say the group has been opaque on the question in early discussions. But
at the panel, Ignagni flashed some ankle on the question (literally
because we were sitting on high stools.) She suggested an arrangement
in which insurers and the government in effect would divide the cost of
insuring the biggest risks through a combination of rating reform and
public subsidies. "You have to think about the ratings and the subsidy
in tandem," she argued. For instance, she noted, a pure form of
community rating--in which everyone is charged the same premium
regardless of their age or health status--would substantially increase
rates on young healthy families (while reducing them on older or sicker
people). In that instance, "you might decide well then we could
subsidize those [young] individuals to cushion that," she said.
Alternately, she said, you might allow insurers to vary rates somewhat
based on age, but use subsidies to ensure that say, "nobody over 55
would have to pay more than 10 per cent of income" for premiums--as
California did in its reform. More details on the issue are coming:
"You will hear a great deal from us soon about rating," she said.

Settling
the details of such a rating-subsidy scheme wouldn't be easy (nothing
in health care is). And there are plenty of other stumbling blocks that
could derail reform. Among the most controversial is the plan backed by
Obama and many Democrats to create a public competitor to the private
insurance companies--a kind of Medicare for all. It's intended to force
the private insurers to cut costs and improve service, but they
consider it, as Ignagni put it, a "stalking horse" to drive the nation
toward a single-payer government system. So do almost all Republicans;
at the panel Sen. Robert Bennett (R-Utah), who has co-authored a
bipartisan universal coverage bill that includes the individual
mandate, said that Republicans view a public competitor as "a slippery
slope toward a government-run system." Including such a public plan in
reform legislation, he predicted, would guarantee intense GOP
opposition: "If this is seen as ultimately a pathway to a single payer
government run system, Republicans will fight it with every possible
energy and frankly...a lot of Democrats will too." Yet the idea of a
public competitor has stirred great passion on the left, and Stern
described it as a "must-have" in the final legislation.

It
wouldn't be easy but my guess is Obama and Senate Democrats (if not
necessarily House Democrats) would jettison the public plan--or scale
it back to a token level--if an agreement is in sight on the other
central issues. Obama would fundamentally change the prospects for
health reform if he can build an alliance with the insurance industry,
which led the successful fight against Bill Clinton's universal
coverage plan. Against that very tangible political benefit, the value
of a public competitor (which also frightens the big provider interests
because they fear it would slash reimbursement rates) might come to
seem too theoretical to most Democrats.

There
were other encouraging notes at the session, too. Stern, for instance,
said he was open to limiting the current "tax exclusion" that frees
workers from paying taxes on the money their employers contribute
toward their premiums. That idea, which could contribute substantially
to financing coverage for the uninsured, is usually anathema to labor
but Stern said: "In any part of this health care agenda, we cannot let
things rise simply by letting purchasers make decisions without some
sense of responsibility to try to limit costs. So I think there is
going to be a cap of some sort; the question is what kind."

The
barriers to health care reform are easy to identify: whether to require
all employers to contribute toward coverage for their employees;
whether to establish the public competitor to private insurance
companies; how to reduce the growth in health care costs; and how to
pay for the public subsidies required to maintain an affordable
individual mandate. The complexity of those choices help explain why
Stern's union and the American Federation of State, County and
Municipal Employees, according to Saturday's New York Times, recently
withdrew from a dialogue with industry groups aimed at producing a
consensus report.

But those private
consensus-building efforts, while valuable, remain somewhat premature.
It's helpful for diverse groups to share ideas and build trust. But
it's unrealistic to expect any interest to make tough concessions in
this dialogue until they test the market for their preferred ideas in
Congress. If and when health reform legislation starts moving, all the
players will accept different compromises than they would now, as they
measure the ideal against the achievable. Indeed, administration
officials believe so many groups, from AHIP to the Pharmaceutical
Research and Manufacturers of America (another unlikely potential Obama
ally) have already signaled unusual flexibility precisely because the
president has so strongly indicated his intention to move forward. "The
thing that was really helpful...was how much people have moved thinking
that Obama was going to go," said one administration official who
participated in Thursday's White House summit. "They are only where
they are because they think something is coming."

If
this is finally the year that something big is indeed coming on health
care reform, the odds are high that Ignagni and Stern will be at the
table when it does--and that the deal each sketched out on Thursday (an
individual mandate for insurance reform) will provide the foundation of
the agreement.

Ronald Brownstein, a two-time finalist for the Pulitzer Prize for his coverage of presidential campaigns, is Atlantic Media's editorial director for strategic partnerships, in charge of long-term editorial strategy. He also writes a weekly column and regularly contributes other pieces for the National Journal, contributes to Quartz, and The Atlantic, and coordinates political coverage and activities across publications produced by Atlantic Media.